Monday, June 16, 2014

Botswana holds rate, sees inflation within target range

Botswana's central bank maintained its Bank Rate at 7.5 percent, as expected, saying the "state of the economy, domestic and external economic prospects, and the inflation outlook, suggest that the current monetary policy stance is consistent with maintaining inflation within the bank's 3-6 percent objective in the medium term."
The Bank of Botswana, which cut its rate by 200 basis points in 2013 as inflation fell, noted that inflation was stable at 4.5 percent in the months of May and April and weak domestic demand and expected benign external prices contributed to the positive outlook for inflation.
"However, this outlook could be adversely affected by any unanticipated large increase in administered prices and government levies, as well as higher than currently forecast international oil prices," the bank added.
On June 9 the central bank's head of monetary and financial stability, told reporters that the central bank would stick to its accommodative policy stance to support economic growth that is set to slow because of power shortages.
Kealegoga Masalila also forecast that the economy of Botswana, the world's biggest producer of diamonds, would probably expand 5.1 percent in 2014, down from a faster-than-expected 5.9 percent in 2013.
Botswana's mining sector grew by 10.6 percent in 2013 while growth in the non-mineral sector slowed to 5.2 percent from about 6 percent in 2012.
The central bank said today that non-mining economic activity will remain below potential in the medium term, with the influence of demand on economic activity expected to be modest, reflecting trends in government spending and personal incomes.
The International Monetary Fund (IMF) forecast that Botswana's economy would grow 4.5 percent this year with the slowdown in diamond recovery and problems in electricity production and water supply softens economic activity.